If you have deliberately delayed the payment of any of your bills in Singapore or record of your creditor shows such delay by mistake and sends your account for collection then it can affect your credit score devastatingly. In such condition it becomes necessary for you to know the extent it can affect your credit and the ways you can deal with such upsetting situations. Though you can avoid such things if the collection of debt has already been recorded on your credit report but still it is beneficial for you to know few things in this regard.
What is debt collection?
When you have not paid back your debts on time then your account turns into a collection account. If you have offended to pay significant amount of a debt, whether it is a credit card bill or medical bill, the related company will either right your debt off as a bad debt or a losing amount or sell it to a collection agency to collect the owed money from you. Now the collection agency is responsible to recover the delayed payments from you.
Different policies are adopted by different lenders while selling their bad debt accounts to a collection agency. Many lenders transfer such accounts to the collection agency after 180 days of non-payment of the last monthly instalment. The accounts in collections are also reported to credit bureaus by the lender or collection agency so that the status of the credit record of the borrower be marked as Collection. While sending your account for Collection to the credit bureaus your original creditors may or may not notify you about this reporting.
If your debt accounts sent to Collection have been reported to any of your credit bureaus then you can see the details of the account sent to collection of your entire credit report to known more in this regard. If any collection account has recently been opened or closed on your credit report only then you can the page of your collections.
How does it affect your credit score?
Your credit score may drop considerably to the amount you owe or sent for collection, if you have an account reported as in collections. The level of affect to your credit record depends on level of your credit in your report before it was sent by the collection agency for marking it with collection status. You can lose more points if your score in the credit report is higher.
Along with it, the amount you owe or the collection amount also affect the extent of damage to your credit score. For instance, if the debt you owe originally is below $100 then it may not damage your sore significantly or at all even if the collection agency has reported the credit bureau to mark its status in-Collection.
Sometimes the type of debt is also used by credit bureaus to differentiate while evaluating your credit score after marking it as in-collection. They usually disregard the accounts in collection that have already been paid or while differentiating between medical debts and non-medical debts.
If you have an account in collections then along with dropping your credit score it will also affect your future plans to get financial help. Particular if the collection is still unpaid or has been transferred for collection recently, as a result you can be denied to get some loans or credit cards etc.
Tips for dealing with collection accounts
The worst thing after having an in collection account in Singapore is that you cannot hide yourself or run from it. You can dodge the debt collector for sometime but it will increase the amount of your debt out of your control. After that one day either you will have to face bankruptcy proceedings or your property or car will be seized and sold by the collectors to recover debts from you.
But in any condition you should not allow the debt collectors to frighten you. You should not hesitate to call the police if they cross their limits and do something illegal to you. But if they contact you for the collection of their debts in legal way then you can deal with them in many ways. The best option for you is to accept the circumstances if you are sure that the information provided in your credit report regarding in collection account is correct and true. The second option is to negotiate with the collection company and settle down your account amicably with the help of a mediator.
You can also contact Consumer Financial Protection Bureau in Singapore to know the best ways to reply the debt collector or negotiate with the credit company for a settlement. While negotiating with the debt collection company you can negotiate for lowering interest rate, especially in case a bank is the lender, or for a monthly payment plan. Bargaining with the debt collectors to settle down at a manageable repayment terms is much better than running away from them. It will not only reduce you future botheration like facing legal battle etc. but also help in saving some money. But while negotiating with debt collectors to settle down your old debts you should ensure to manage your other accounts and debts properly. The affect of in collection account on your credit score reduces with the passage of time. Moreover, you can restore you score of credit affected by in collection account by paying all of your current bills on time.
How to deal with a wrong in collections account
If you are sure that the in collections accounts have been wrongly reported or updated by the credit bureau then you can file a dispute with the credit bureau as you file to rectify other types of errors in your credit report. You can request for the removal of the information from your report if the original law-breaking of the debt has been over seven years or if the debt reported is not owed by you.
Thus the affect of debt collection on your credit score can be managed easily in Singapore if you deal with the collectors carefully instead of running from them.